On Wednesday the rally took a breather but still managed to close up 6 points to end the day at 3669 in a choppy session.
Stock Market Outlook Chart Comments At The Close on Wed Dec 2 2020
Wednesday saw the index close above 3600 for the 6th straight trading day. The closing candlestick however is again bearish for Thursday and is signaling the potential for a down day to develop.
The Upper Bollinger Band continued to fall lower on Tuesday. The Lower Bollinger Band is climbing dramatically higher and is now above the 100 day moving average. We could see a change in trend shortly as often this move by the Lower Bollinger Band sets up the index for a potential Bollinger Bands Squeeze perhaps as early as Friday. This could become an important signal as the Lower Bollinger Band is rising very quickly. It has to be watched to be determined how it will play out.
The 21 day, 50 day, 100 day and 200 day moving averages are all rising, a bullish sign. The 21 day is starting to rise rapidly as well. Often that indicates a dip should be expected shortly. The up signal from Oct 21 is still in play, and the chart remains bullish despite the closing candlestick and change in the Bollinger Bands.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Nov 5. The up signal on Wednesday was slightly weaker.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is falling.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has a neutral to down signal in place. It is overbought.
Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is rising.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is falling.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
3600 is resistance
3550 is support
3500 is support
3450 is support
3400 is support
3375 is support
3300 is support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
Stock Market Outlook for Tomorrow – Thu Dec 3 2020
For Thursday, the market is looking at more mixed signals with some technical indicators pointing to another choppy session that should end lower and other technical indicators pointing to a choppy session that should end higher.
The only thing the technical indicators agree on is Thursday will be a choppy day with dips and spikes throughout. A key though may come from the Weekly Initial Unemployment Insurance Claims that are released in the morning before the open. If they show an improvement which would contradict the reports from Wednesday, the market may push higher ahead of Friday’s November unemployment report.
For Thursday then there is a good chance of a choppy session with primarily a sideways move that could end slightly higher or lower.